Savings vs. Money Market Accounts

Which is Right for You?
Choosing between a savings account and a money market account depends on your financial goals. While both offer security and interest earnings, money market accounts typically provide higher rates and check-writing flexibility. Understanding these differences can help you make the best decision for your savings strategy.
Savings vs. Money Market Accounts
Some financial decisions are harder than others. Should you apply for a 15-year or 30-year fixed-rate mortgage loan? Should you purchase a new car or a used one? Will going back to school in your 40s bring you a high enough salary to offset the high cost of a college education?
Some decisions, though, require a bit less analysis. Choosing between a savings account or a money market account is one of these.
The reason? Despite the different names, there is little difference between money market and savings accounts.
The Accounts
You probably know what a savings account is. It is a safe place in which to hold your money. Your bank or credit union will pay you interest on the money in your account -- though the interest rate on savings accounts is typically rather low. The Federal Deposit Insurance Corporation or National Credit Union Association insures savings account, up to certain amounts, so that you will not lose your dollars even if your bank or credit union falls into financial ruin.
A money market account is a surprisingly similar economic tool. It, like a savings account, is a safe place to store your money. Also, like a savings account, your dollars are protected.
There are a few minor differences, however.
Money Market Accounts
Money market accounts usually require consumers to maintain a higher minimum balance. Money market accounts might also be more flexible, allowing you to write checks -- and quickly access the money in your account -- against the dollars you've deposited in them.
The primary benefit of a money market account? They typically pay out higher interest rates on the money you've saved.
Traditional savings accounts usually require that you maintain a lower minimum balance. Also, savings accounts do not come with any checking options. You cannot write checks against the balance in your bank savings account.
Finally, savings accounts pay a lower amount of interest.
Does it Matter?
The truth, though, is that for most consumers, the difference between savings accounts and money market accounts do not matter too much. The main difference between the two is the higher interest rates that come with a money market account. However, rates on these accounts are still fairly low when compared to other investment vehicles. This means that you'd need to invest a lot of dollars in your money market account to generate an appreciable amount of interest.
Who is a good candidate for a money market account? Someone who has a lot of money to deposit and who would prefer the flexibility to write checks against their savings.
However, in reality, the decision to go with a traditional savings account or a money market account will not make too much of a difference in your financial health.
What's Next?
Choosing between a savings account and a money market account comes down to your financial goals and how much flexibility you need. If you're looking for a secure place to grow your savings while maintaining easy access to funds, Salem Five Bank offers insights to help you decide. Whether you're prioritizing higher interest rates or lower minimum balances, understanding your options can help you make the best financial choice.
FAQs: Savings vs. Money Market Accounts
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What is the main difference between a savings account and a money market account?
- A savings account is a secure place to store money while earning interest, typically with lower balance requirements. A money market account offers higher interest rates and check-writing privileges but often requires a higher minimum balance.
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Which account is better for earning interest?
- Money market accounts generally provide higher interest rates than savings accounts, making them a better option for those with larger balances who want to maximize earnings.
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Can I write checks from a savings account?
- No, traditional savings accounts do not allow check-writing. However, money market accounts often provide this feature, offering more flexibility in accessing funds.
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Are both accounts insured?
- Yes! Both savings and money market accounts are insured by the FDIC (for banks) or the NCUA (for credit unions), protecting deposits up to $250,000 per account holder.
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How do I decide which account is right for me?
- If you need easy access to funds and lower balance requirements, a savings account may be best. If you have a larger balance and want higher interest rates with check-writing options, a money market account could be a better fit.